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DECREE No.28/1998/ND-CP OF MAY 11, 1998 OF THE GOVERNMENT DETAILING THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law on Value Added Tax with code number of 02/1997/QH9 of May 10, 1997;

At the proposal of the Minister of Finance,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Value added tax is a tax calculated on the added value of goods or services in the process of their production, circulation and consumption.

Article 2.- Subject to the value added tax are goods and services used for production, business and consumption in Vietnam, except for those defined in Article 4 of this Decree.

Article 3.- Value added tax payers as defined in Article 3 of the Law on Value Added Tax are organizations and individuals that produce and trade in taxable goods and provide services in Vietnam, irrespective of their business lines and trades, forms and organization (hereafter collectively referred to as the business establishments), and other organizations and individuals that import taxable goods (hereafter collectively referred to as the importers).

Article 4.- The objects which are not subject to the value added tax, as defined in Article 4 of the Law on Value Added Tax, are specified as follows:

1. Products of cultivation (including products from planted forests), husbandry and aquaculture, which are not yet processed into other products or are only preliminarily processed and sold by organizations and/or individuals themselves.

Preliminary processing is the processing associated with the process of turning out the products of cultivation, husbandry or aquaculture, through which such products have not yet become other kinds of products or goods;

2. Salt products which are produced from sea water, natural rock salt, refined salt and iodized salt;

3. Goods and services subject to the special consumption tax which shall be exempt from the value added tax in the process of production, import or service provision, on which the special consumption tax has already been imposed;

4. Equipment, machinery and specialized transport means which cannot be manufactured in the country, and are imported by establishments with investment projects in order to form their fixed assets under such projects.

In cases where the establishments import equipment lines and machinery in complete sets which are not subject to the special consumption tax, but such complete lines include equipment and machinery of kinds which can be manufactured in the country, the value added tax shall not be imposed on the whole complete equipment lines and machinery.

The ministries, the ministerial-level agencies, the agencies attached to the Government and the specialized management agencies at the provincial level shall certify those kinds of equipment, machinery and specialized transport means which cannot be manufactured in the country, and are imported by the business establishments to create fixed assets. The Ministry of Finance shall guide the procedures and dossiers applicable to business establishments importing equipment, machinery and specialized transport means which are not subject to the value added tax defined in this Clause.

5. Transfer of land use right, which is subject to the land use right transfer tax;

6. State-owned houses sold to their present tenants;

7. Capital lending activities carried out by credit institutions, banks, investment funds and capital transfer in accordance with law;

8. Life insurance; insurance for school pupils; insurance for domestic animals and cultivation plants and non-profit insurances;

9. Medical examination and treatment, prophylactic and human health care services, and veterinary services;

10. Mass and popular cultural, exhibition, physical training and sport activities; training and competition activities free of charge, or with fee but not for business purpose;

Art performance activities such as: song and dance, music shows, drama, circus and other art performance activities and art show organization services;

The production of films of various kinds;

The distribution and projection of motion pictures of all themes and types, and video documentary, reportage or scientific films;

11. Teaching and vocational training activities, including general education, foreign language and informatics teaching and other vocational training activities;

12. Radio and television broadcasting under programs financed by the State budget;

13. Printing, publishing and distribution of newspapers, magazines, specialized news bulletins, political books, text books, teaching materials, books on legal documents, books in ethnic minority languages; propaganda paintings, pictures and posters; money printing;

14. Public services: sanitation and water drainage in streets and residential quarters; maintenance of zoos, gardens, parks, street greenery, public lighting; funeral services;

15. Maintenance, renovation and construction of cultural, art and public-utility works, infrastructure projects and "houses of gratitude" with capital contributions by people or from humanitarian aids, including cases where the State provides a part of fund which does not exceed 30% of the total actual cost of the project;

16. Public bus transport in service of people's travel within inner cities, industrial parks or between urban areas and neighboring industrial parks with uniform fare prices set by the competent agency. The Ministry of Communication and Transport shall issue the regulation on organization and operation of the bus transport sector;

17. Geological surveys, exploration, measuring and mapping, which are classified as the State basic surveys and funded by the State budget;

18. Water irrigation and drainage in service of agricultural production; clean water exploited by organizations and individuals for daily life in rural and mountainous areas, islands, deep-lying and remote regions;

19. Weapons and ammunitions for exclusive use in service of national defense and security specified by the Ministry of Finance together with the Ministry of Defense and the Ministry of the Interior. For the weapons and ammunitions purchased or manufactured with State budget funds, the tax exemption shall be specified in the budget estimates;

20. Goods imported in the following cases: humanitarian aid and non-refundable aid; gifts for State agencies, political organizations, socio-political organizations, social organizations, socio-professional organizations, people's armed force units; belongings of foreign organizations and individuals that enjoy diplomatic immunities; personal effects within the duty-free luggage limit; belongings of overseas Vietnamese brought along in their returns to the country. The goods imported in the above-said cases shall be defined according to the regime set by the State;

21. Goods which are trans-shipped, transited or transported through Vietnam's border; goods temporarily imported for re-export; goods temporarily exported for re-import, raw materials and materials imported for production or processing of export goods under the production or processing contracts with foreign countries;

22. Goods and services directly supplied for sea-going vessels, air planes, trains or other transport means going from Vietnam to foreign countries and goods for duty-free sale at the duty-free shops at international airports, seaports and railway stations and border gates;

23. Technology transfer under the provisions of Chapter III, Part 6 of the Civil Code of the Socialist Republic of Vietnam. For technology transfer contracts accompanied by machinery and equipment, the tax exemption shall be given only to the transferred technological value;

24. Gold imported in form of ingots or pieces and gold of various kinds not yet processed into fine art articles, jewelry or other products. Gold in ingots or pieces and unprocessed gold shall be defined in conformity with international standards;

25. Export products which are minerals not yet processed into other products and specified as follows:

- Crude oil;

- Coal;

- Slate stone, sand, rare earths;

- Gems;

- Manganese, tin, iron, chromite, emenhite and apatite ores.

The Ministry of Finance shall base itself on the requirements of the State management over natural resources and minerals in each period to propose to the Government to readjust, amend and supplement the kinds of natural resources and minerals defined in this Clause;

26. Goods and services of business individuals with a monthly average income lower than the minimum wage level prescribed by the State for State employees. Such income is determined by the turnover from business activities minus (-) reasonable expenses for such business activities;

Organizations and individuals that purchase, sell and/or import goods or provide services not subject to the value added tax as defined in this Article shal not be entitled to the deduction or reimbursement of input value added tax on goods and services in the value added tax-free process.

Chapter II

THE BASES AND METHOD OF TAX CALCULATION

Article 5.- The bases for calculating value added tax are the tax calculation prices and tax rates.

Article 6.- The value added tax calculation prices of goods and services defined in Article 7 of the Law on Value Added Tax are specified as follows:

1. For goods or services sold by production or business establishments, they shall be the sale prices not yet with value added tax.

2. For imported goods, they shall be the border-gate import prices plus (+) import tax. The border-gate import prices shall be determined according to regulations on import tax calculation prices.

3. For goods or services used for exchange or internal consumption, as gifts or donations, they shall be the value added tax calculation prices of goods or services of the same or equivalent type at the time such activities are conducted.

4. For property leasing activities, irrespective of types of leased properties and leasing forms, they shall be leasing prices not yet with tax. In cases where the rental is paid in installments or in advance for a certain leasing duration, the value added tax shall be calculated on such rental paid in installments or in advance.

5. For goods sold by mode of installment payment, they shall be calculated according to the non-tax sale prices of such goods paid in lump sum (excluding the interests paid in installments), but not according to the amount of money paid in each installment.

6. For the goods processing activities, they shall be the non-tax processing prices (including remuneration, fuel, power, auxiliary materials and other processing expenses).

7. For construction or installation activities, they shall be the non-tax construction or installation prices of projects, project units or work performed; in cases where the project construction or installation price are paid according to project unit construction tempo or work completed and handed over, the value added tax shall be calculated on the value of the work completed and handed over.

8. For goods and services of special characters, for which the payment vouchers stating payment prices that have included value added tax are applied, the non-tax prices to serve as tax calculation basis shall be determined by the prices that have included tax divided by (1 + (%) of the tax rates of such goods and services).

9. For goods or service sale-purchase agency or brokerage activities with commission, non-tax prices to serve as tax calculation basis shall be the commissions earned from such activities.

The tax calculation prices of goods and/or services defined in this Article shall also include additional collections and surcharges enjoyed by the business establishments.

Basing itself on the provisions of this Article, the Ministry of Finance shall provide specific guidance on the value added tax calculation prices of goods and services.

Article 7.- The value added tax rates prescribed in Article 8 of the Law on Value Added Tax are specified as follows:

1. The tax rate of 0% shall be applicable to export goods, goods processed for export. Export goods include goods exported to foreign countries and those regarded as exports according to the Government's regulations.

2. The tax rate of 5% shall be applicable to the following goods and services:

a) Clean water in service of production and daily life exploited from natural water resources and sold to others by business establishments, except for clean water not subject to tax defined in Clause 18, Article 4 of this Decree and water of kinds with the applicable tax rate of 10%;

b) Fertilizers, ores used for the fertilizer production; insecticide, pesticide and growth stimulants for domestic animals and cultivated plants;

c) Specialized medical equipment, machinery and instruments; medical cotton and bandage;

d) Medicinal and prophylactic drugs for human beings and domestic animals;

e) Teaching and learning aids: models, pictures, writing boards, chalk, rulers, compasses for teaching and learning purposes and specialized teaching or lab equipment;

f) Children toys; scientific-technical books, literary and art books, books for children, law books excluding legal document books defined in Clause 13, Article 4 of this Decree;

g) Cultivation, husbandry and aquaculture products that have not yet been processed, including animal, breeds saplings, seeds, except for those not subject to tax as defined in Clause 1, Article 4 of this Decree;

h) Unprocessed forest products (excluding timber and bamboo shoots); fresh and raw foodstuffs and foods.

Unprocessed forest products are those exploited from natural forests such as rattans, bamboo of various species, mushrooms, Jew's ear fungus; medicinal roots, leaves, flowers and plants and other forest products;

Fresh and raw foodstuffs are foodstuffs not yet processed or preliminarily processed;

Foods include paddy, rice, maize, potatoes and manioc;

Fresh and raw foodstuffs and foods which are unprocessed cultivation, husbandry or aquaculture products directly sold by producing organizations and individuals shall be exempt from the value added tax as stipulated in Clause 1, Article 4 of this Decree;

i) Products made of jute, rush, bamboo of various species and assorted leaves, which are manufactured and processed from jute, rush, bamboo of various species and assorted leaves as main raw materials;

j) Preliminarily processed home-grown cotton, which is peeled, seed-removed and classified cotton;

k) Feeds for cattle, poultry and other domestic animals;

l) Scientific and technical services, including activities of scientific and technical research, application and guidance;

m) Services in direct service of agricultural production, including activities of plowing and harrowing agricultural land; digging, embanking and dredging canals, ditches, ponds and lakes in service of agricultural production; preventing and combating crop and animal diseases; farming, cultivating, tending and harvesting agricultural products;

3. The tax rate of 10% shall be applicable to the following goods and services:

a) Oil, gas, coal, ore and other mineral products;

b) Commercial electricity sold by electricity production and business establishments;

c) Electronic and mechanical products, electric appliances;

d) Chemicals and cosmetics;

e) Fibers, fabrics, garments and embroidering items;

f) Paper and paper products;

g) Sugar, milk, confectionery, beverages and other processed foodstuffs;

h) Ceramic, pottery, glass, rubber and plastic products, wood and wood products; cement, bricks, tiles and other construction materials;

i) Construction and installation services;

j) Transportation and loading/unloading services;

k) Postal, mail and telecommunications services;

l) Leasing of houses, offices, warehouses, ports, storage yards, plants, workshops, machinery, equipment and transport means;

m) Legal consultancy services;

n) Services of photographing, printing and developing films; cassette tape recording, dubbing and renting; photocopying; video shooting and projecting;

o) Hair dressing, tailoring, fabric dyeing, laundry;

p) For other goods and services which are not defined in Clauses 1, 2 and 4 of this Article and goods items subject to the special consumption tax, the value added tax must be paid in the trading process.

4. The tax rate of 20% shall be applicable to the following goods and services:

a) Gold, silver and gems purchased and/or sold by business establishments;

b) Hotels, tourism, food catering;

c) Lottery of all kinds;

d) Sea shipping agents;

e) Brokerage services.

Basing itself on the tax rates prescribed in this Article, the Ministry of Finance shall specifically guide the application of such tax rates to goods and services of various kinds.

Article 8.- The value-added tax calculation methods defined in Article 9 of the Law on Value Added Tax are specified as follows:

1. The method of tax deduction.

The payable tax amount is equal to the output value added tax amount minus the deductible input value added tax amount.

a) An output value added tax amount is equal to the tax calculation price of taxable goods or service to be sold or provided multiplied by the value added tax rate of such goods or service.

b) An input value added tax amount is equal to the total value added tax amount stated in the added value invoice for purchase of goods or service or in the voucher of payment of value added tax on import goods used for production or trading of goods or service subject to the value added tax.

For purchased goods which are unprocessed agricultural, forestry and aquatic products sold by the producers, and goods and services with vouchers stating payment prices that have included tax, the input tax shall be deducted in accordance with Article 9 of this Decree.

The method of tax deduction shall be collectively applied to all business establishments, except for those subject to the method of direct calculation on added value as stipulated in Clause 2 of this Article.

2. The method of direct calculation on the added value

A payable tax amount is equal to the added value of taxable goods or service multiplied by the value added tax rate of such goods or service.

a) The added value is equal to the payment price of goods sold or service provided minus the payment price of corresponding goods or service purchased.

The payment price of goods or service purchased or sold is the actual purchase or sale price stated in the purchase or sale invoice of such goods or service, including value added tax and additional collections and/or surcharges enjoyed by the seller and paid by the purchaser.

The payment price of goods or service purchased corresponding to goods or service sold shall be determined by the value of goods or service purchased and used by the business establishment for production or trading of goods or service subject to the value added tax to be sold.

In cases where a business establishment fails to properly effect the purchase and/or sale of goods and services with invoices and vouchers serving as basis for determining added value in accordance with the above-said stipulations, such added value shall be determined as follows:

- For a business establishment that carries out the sale of goods or services with all required invoices and vouchers, thus accurately determining its turnover from the sale of goods or services, but fails to sufficiently acquire purchase invoices of goods and services, the added value shall be determined by the turnover multiplied by the percentage (%) of the added value on the turnover.

- For a business individual who fails to apply or improperly applies the invoices for purchase and sale of goods and services, the tax authority shall base itself on the business situation of such individual to determine the taxable turnover; the added value shall be determined by the turnover multiplied by the percentage (%) of the added value on the turnover.

The percentage (%) of the added value on the turnover to serve as a basis for calculating added value shall be set by the tax authority, suitable to each business line or trade.

The Ministry of Finance shall guide the determination of added value for each business line or trade.

b) The method of direct calculation on added value shall be applied only to the following subjects:

- Individuals engaged in production and/or business activities and foreign organizations and individuals doing business in Vietnam that are not governed by the Law on Foreign Investment in Vietnam and that fail to fully implement regulations on accounting, invoices and vouchers to serve as basis for tax calculation by the method of tax deduction;

- Business establishments that purchase and/or sell gold, silver, gems and foreign currencies;

Article 9.- Deduction of input value added tax.

1. A business establishment that pays the value added tax by the method of tax deduction shall be entitled to the deduction of input value added tax (hereafter referred to as "input tax") as follows:

a) Input tax on goods and services used for the production and trading of goods and services subject to the value added tax shall be fully deducted.

b) For goods and services used for the production and trading of both goods and services subject to the value added tax and those not subject to the value added tax, only input tax on goods and services used for the production and trading of goods and services subject to the value added tax shall be deducted.

The business establishments shall have to separately account deductible input tax and non-deductible one; in cases where they fail to do so, they shall be entitled to deduct according to the percentage (%) between the turnover subject to the value added tax and the total sale turnover.

c) Any deductible input tax incurred in a month shall be declared and deducted upon the calculation of payable tax amount of such month.

In particular, with respect to fixed assets, if the amount of input tax deduction is large, it shall be gradually deducted or reimbursed in accordance with Article 15 of this Decree.

d) In cases where a production and/or processing establishment purchases unprocessed agricultural, forest or aquatic products from the producers without added value invoices, the input tax shall be deducted at a certain rate (%) on the value of the purchased goods, as follows:

- The rate of 5% shall be applicable to cultivation products from trees planted for sap, resin or oil, sugar cane, raw bud tea, paddy, maize, potatoes, manioc; husbandry products: cattle and poultry; fish, shrimp and other aquatic products;

- The rate of 3% shall be applicable to agricultural and forest products other than those entitled to 5% deduction rate above.

The Ministry of Finance shall base itself on the price and situation of production and trading of each goods item to propose the Government to readjust the list of products and the input tax deduction rates prescribed in this Article.

The input tax deduction or reimbursement for purchased agricultural, forest and aquatic products defined above shall not apply to cases where such products are used as raw materials for production or processing of export goods.

e) In cases where a business establishment purchases goods or services with special character that use vouchers stating payment price which has included value added tax, the deductible input value added tax shall be determined on the basis of the price which has included tax and the method of determining non-tax price as defined in Clause 8, Article 6 of this Decree.

2. The basis for determining the deductible input tax amount shall be as follows:

a) For purchased goods or services, it shall be the value added tax amount stated in the added value invoice for the purchase of goods or services.

b) For import goods, it shall be the paid value added tax amount stated in the voucher of the payment of value added tax on import goods.

c) For unprocessed agricultural, forest or aquatic products purchased from the producers with deductions made according to Point d, Clause 1 of this Article, it shall be the actual purchase price stated in the list of purchased goods under the tax authority's guidance.

d) For purchased goods or services with special character, that use vouchers stating payment price which has included value added tax, such vouchers shall serve as basis for calculating the deductible input tax amount in accordance with Point e, Clause 1 of this Article.

Article 10.- Business establishments shall have to properly effect the purchase and sale of goods and services with invoices and vouchers as prescribed by law. Invoices for purchase and sale of goods and services prescribed for business establishments shall be as follows:

1. Business establishments that pay tax by the method of tax deduction shall have to use the added value invoices. When making goods or service sale invoices, the business establishments shall have to fully and accurately state the following details: non-tax sale prices, additional collections and surcharges (if any) outside the sale prices, value added tax, payment prices that have included tax.

Where an invoice fails to state the value added tax amount, such value added tax shall be determined by the invoiced payment price multiplied by the value added tax rate.

2. Business establishments that directly pay tax on the added value shall use ordinary invoices. The sale prices of goods or service stated in invoices shall be the payment prices that have included value added tax.

3. Business establishments that wishes to use invoices and voucher different from the commonly set form shall have to register their own invoices and voucher forms with the Ministry of Finance (the General Department of Taxation) and shall be entitled to use such forms only after receiving written approval.

In cases where a business establishment directly retails its goods to consumers at a sale price lower than the set price, it shall have to make sale invoices; if it fails to make sale invoices, it shall have to make a list of retailed goods according to the form set by the tax authority to serve as basis for the value added tax calculation; in cases where the purchasers request, it shall have to make sale invoices as prescribed.

The Ministry of Finance shall issue regulations on management and use of invoices and vouchers; issue and inspect the use of invoices and vouchers as prescribed in this Article.

Chapter III

TAX REGISTRATION, DECLARATION, PAYMENT AND FINAL SETTLEMENT

Article 11.- Business establishments shall have to register their tax payment as follows:

1. All business establishments liable to the value added tax as defined in Article 3 of this Decree, including their attached units and branches, shall have to register with the tax authorities of the localities where the establishments conduct their business activities, their business locations, business lines and trades, labor, capital, tax payment places and other relevant criteria according to the tax authorities' guidance.

For newly set up business establishments, the time limit for tax payment registration is ten days from the date they are granted business registration certificates; In cases where such business establishments have not yet been granted business registration certificates but conduct business activities, they shall have to register their tax payment before conducting such business activities. In case of a merger, amalgamation, splitting, division, dissolution, bankruptcy or change in its business line or place, the business establishments, which have already registered their tax payment shall also have to notify the tax authority thereof within five days before such change occurs.

2. In cases where a business establishment that pays tax by the method of direct calculation on added value fully meets the following conditions: observing regulations on invoices, vouchers and accounting books; properly registering and paying tax; and voluntarily registers to apply the tax payment by the method of tax deduction, the tax authority shall, after inspecting and certifying that such business establishment properly and fully meets the above-said conditions, notify such establishment of its approval for implementation; if in the implementation course, the establishment fails to comply with prescribed conditions, the tax authority shall issue a notice to suspend the application of the tax deduction method.

The Ministry of Finance shall guide the procedures for registering the tax payment and the competence to consider and permit the business establishments that have previously paid tax by method of direct calculation on added value to apply the method of tax deduction as prescribed in this Article.

Article 12.- Business establishments and importers shall have to make value added tax declarations as follows:

1. An establishment that trades in goods or services subject to the value added tax shall have to make monthly value added tax declaration and submit it together with the list of goods or services purchased and sold, which serves as basis for determining the monthly payable tax amount, to the tax authority within the first ten days of the following month. Even in cases where there is no turnover from sale of goods or services, where input tax and output tax do not incur, the business establishment shall still have to make and submit its tax declaration to the tax authority. The business establishment shall have to fully declare the tax according to the set form and take responsibility for the accuracy of its declaration.

In cases where foreign organizations and/or individuals, which have not yet set up their offices or executive offices in Vietnam, supply goods or services subject to the value added tax to the Vietnamese organizations and/or individuals for consumption, such Vietnamese organizations and individuals shall have to pay the value added tax and make value added tax payment declarations instead of the foreign parties. The payable value added tax shall be calculated on the prices of goods or services to be paid to the foreign parties.

2. A business establishment or an importer that imports goods subject to the value added tax shall have to make and submit a value added tax declaration upon each importation, together with import tax declaration with the import tax collecting agency.

3. A business establishment engaged in consignment trade shall have to declare and pay tax for each consignment of goods to the tax authority of the locality where it purchases goods, before it transports such goods.

4. A business establishment that trades in different kinds of goods and/or services with different value added tax rates shall have to declare the value added tax according to the tax rate set for each kind of goods or service; if such business establishment fails to determine payable tax amount according to each tax rate, it shall have to calculate and pay tax at the highest tax rate applicable to goods or services it produces and/or trades in.

In cases where a business establishment, which purchases and/or sells gold, silver and gems and is engaged in the processing and fashioning of such products, fails to account the separate turnovers and taxes for such activities, a tax rate of 20% shall be collectively applied to both processing and fashioning acitivities and the method of direct tax calculation on added value shall be applied.

Article 13.- The value added tax shall be paid into the State budget according to the following regulations:

1. Business establishments shall have to pay fully and on time the value added tax into the State budget according to the tax payment notices issued by the tax authorities.

The deadline for tax payment for a month as stated in a tax notice shall not be later than the 25th day of the following month.

For households and individuals that conduct business activities in areas far from State treasury or conduct mobile and irregular business activities, the tax authorities shall organize the tax collection and remittance into the State budget. The tax authorities shall have to remit the collected tax amounts into the State budget within 3 days; particularly for mountainous areas, islands and areas with difficult traveling conditions, such time limit shall be 6 days from the date when the tax amounts are collected.

2. Business establishments and individuals that import goods shall have to pay the value added tax upon each importation.

The deadline for issuing a notice and the deadline for payment of value added tax on import goods shall be the deadlines for the import tax notice and payment. For goods exempt from import tax, the deadline for value added tax declaration and payment shall be the deadline prescribed for those subject to import tax.

In cases where import goods (including materials, machinery, equipment...), which are not subject to the value added tax upon importation, are sold or used for other purposes, the concerned establishments shall have to declare and pay the value added tax as for other goods.

3. A business establishment shall be entitled to have its overpaid tax amount in a taxation period deducted from the payable tax amount for the following period, or shall have to pay the outstanding tax amount from the previous period. If during a taxation period, a business establishment that pays the value added tax by the method of tax deduction has the input tax amount larger than the payable output tax amount, it shall be entitled to tax deduction for the following taxation period. In cases where a business establishment makes new investment on fixed assets and has a large input tax deduction amount, it shall be entitled to gradual tax deduction or reimbursement in accordance with Article 15 of this Decree.

4. The value added tax shall be paid into the State budget in Vietnam Dong.

In cases where a business establishment has its turnover, input tax and output tax in foreign currency(ies), it shall have to convert them into Vietnam Dong at the exchange rates announced by the State Bank of Vietnam at the time such foreign currencies are generated, for the purpose of determining the payable tax amount.

The Ministry of Finance shall guide in detail the tax payment procedures applicable to each tax payment mode and each kind of tax payers defined in this Article.

Article 14.- Business establishments shall have to make the annual tax final settlement with the tax authorities. A tax final settlement year shall be the solar calendar year. Within 60 days from the end of a year, the establishments shall have to submit their tax final settlement reports to the tax authorities and fully pay the outstanding tax amounts into the State budget within 10 days from the date of submitting the final settlement reports; in case of overpayment, such overpaid amounts shall be deducted from the payable tax amounts for the following period.

In case of a merger, amalgamation, division, splitting, dissolution or bankruptcy, a business establishment shall also have to make the tax final settlement and submit the report thereon to the tax authority within 45 days from the date of issuance of the decision on such merger, amalgamation, division, splitting, dissolution or bankruptcy.

The business establishment shall have to declare the total payable tax amount, the paid tax amount, the outstanding amount or overpaid amount up to the date of tax final settlement. The establishment shall have to fully and accurately declare the norms and data according to the set form of tax final settlement and submit the tax final settlement to the tax authority of the locality where the establishment has registered its tax payment within the time limit prescribed above.

The Ministry of Finance shall set form and guide the final settlement of value added tax as stipulated in this Article.

Article 15.- The reimbursement of value added tax already paid according to Article 16 of the Law on Value Added Tax shall only be made in the following cases:

1. A business establishment that pays tax by the method of tax deduction shall be considered for quarterly tax reimbursement if its deductible input tax amount of every month in the quarter is always larger than the output tax of such month. Business establishments that seasonally or periodically export goods in large volumes, and have large amounts of input value added tax on their export goods, shall be considered for value added tax reimbursement for each period.

2. If a business establishment, which pays tax by the method of tax deduction, makes investment in the procurement of fixed assets and has a large deductible input value added tax of its fixed assets, it shall be considered for reimbursement of fixed asset input tax as follows:

a) For a business establishment that has made new investment and registered for tax payment with tax authority, but has no output tax, if its investment period is one year or more, it shall be considered for input tax reimbursement for each year. An establishment that has a large amount of input value added tax of its invested assets to be reimbursed, it shall be considered for quarterly tax reimbursement.

b) For a business establishment that has made extensive or intensive investment, if after 3 months of deduction, the undeducted amount of input tax on the investment assets is still larger than the deducted amount; it shall be considered for reimbursement of the undeducted tax amount.

3. A business establishment that has an overpaid tax amount in its tax final settlement upon a merger, amalgamation, division, splitting, dissolution or bankruptcy.

4. A business establishment that has a tax reimbursement decision issued by the competent authority as prescribed by law.

To be entitled to tax reimbursement, business establishments shall have to send their tax reimbursement applications and dossiers to the local tax collection managing authorities. The tax authorities shall have to inspect and determine the tax amounts to be reimbursed, then make the tax reimbursement or request the competent agencies to make the tax reimbursement to establishments according to their competence.

The Ministry of Finance shall specify the procedures and competence to settle the tax reimbursement stipulated in this Article.

Article 16.- The tax authority shall have the following duties, powers and responsibilities:

1. To guide the business establishments that have made business registration in implementing the regulations on value added tax registration, declaration and payment in strict accordance with provisions of the Law on Value Added Tax.

To send second notices to business establishments that fail to properly implement the regulations on tax registration, declaration and payment as guided in the first notice; After the second notice, if such establishments still fail to implement, it shall be entitled to handle such tax-related administrative violation. Upon inspecting and detecting business establishments that have conducted business activities without business registration, it shall request such establishments to make tax registration, declaration and payment as prescribed by law and handle tax-related administrative violations committed by such establishments.

2. To send the business establishments notices on the payable tax amounts and the tax payment deadlines as prescribed. A tax payment notice must be sent to a tax payer within three days before the date of tax payment stated in such notice; the deadline for tax payment for a month shall not be later than the 25th day of the following month.

To issue another notice on the payable tax amount and fine for deferred tax payment under Clause 2, Article 19 of the Law on Value Added Tax if past the tax payment deadline as prescribed by law, a business establishment fails to pay tax. The period of deferred tax payment for a month shall be calculated as from the 26th day of the following month; for import goods and other cases, such period shall be calculated as from the date of tax payment as prescribed by law and stated in the tax notice. If such establishment still fails to pay tax and fine stated in the second notice, the tax authority shall be entitled to apply or request the competent agency to apply handling measures prescribed in Clause 4, Article 19 of the Law on Value Added Tax to ensure the full collection of tax and fine. If such business establishment once again fails to pay full amount of tax and fine even after such handling measures have been taken, the tax authority shall transfer the dossier of the case to law enforcement agency(ies) for handling according to law.

3. To examine and inspect the tax declaration, payment and final settlement by business establishments in order to ensure the strict observance of law.

4. To handle tax-related administrative violations and settle complaints about tax according to law.

5. To request the tax payers to provide accounting books, invoices, vouchers and other records and documents related to the tax calculation and payment; to request concerned credit institutions, banks and other organizations as well as individuals to provide documents related to the tax calculation and payment.

6. To keep and use data and documents provided by business establishments and other subjects in accordance with the prescribed regime.

Article 17.- The tax authority shall be entitled to set the payable value added tax amount for a tax payer in the following cases where the latter:

1. Fails to implement or has improperly implemented the regulations on accounting, invoices and vouchers.

For business establishments that pay value added tax by the method of direct calculation on the added value and business establishments engaged in consignment trade that have not yet carried out or improperly carried out the purchase and sale of goods and/or services with invoices and vouchers, the tax authority shall base itself on their business situation to determine the added value and the payable tax amounts by the tax calculation method defined in Clause 2, Article 8 of this Decree.

For individuals engaged in medium- and small-scale business activities, the tax amount set to be paid each time may serve as basis for tax collection for a period of 6 months or 12 months, depending on the business line, the price fluctuation and the business situation of such tax payers. The tax authority shall have to publicly announce the tax level set for such tax payers.

An individual engaged in medium- and small-scale business activities shall pay tax according to the set level; he/she shall also have to declare any change in his/her business line or suspension of his/her business activities to the tax authority for consideration and readjustment of the set tax level; an individual who suspends his/her business activities for 15 days or more in a month shall be entitled to the 50% reduction of such month's payable tax amount, if he/she suspends his/her business activities for the whole month, he/she shall be exempt from tax payment for that month.

The Ministry of Finance shall stipulate bases for determining individuals with medium- or small-scale business activities; the procedures for declaring business suspension and the tax reduction for households that suspend their business activities comply with this Article.

2. Fails to declare or to submit the tax declaration within the notified time limit; or has submitted the tax declaration but falsely declared the bases for determining the value added tax amount;

3. Refuses to produce accounting books, invoices, vouchers and necessary documents relating to the calculation of value added tax;

4. Is inspected and found to have conducted business activities without business registration, and without tax payment registration and declaration.

The tax authority shall base itself on documents related to survey of business activities of establishments or on the payable tax amounts of other business establishments with the same business lines and similar scale to set the payable tax amount for each business establishment in the above-said cases.

In cases where a business establishment disagrees with the set payable tax amount, it shall be entitled to lodge a complaint to the tax authority that has set the payable tax amount or to the immediate higher authority of such tax authority. Pending the settlement, such complaining business establishment or individual still has to pay tax at the level set by the tax authority.

Chapter IV

HANDLING OF VIOLATIONS, COMMENDATION

Article 18.- Tax payers and tax officials who violate the Law on Value Added Tax shall, depending on the nature and seriousness of their violations, be handled according to Articles 19 and 21 of the Law on Value Added Tax and other legal documents on the handling of tax-related administrative violations.

Article 19.- Tax authorities and tax officials that well fulfill their assigned tasks; organizations and individuals that record achievements in implementing the Law on Value Added Tax; and tax payers who well fulfill their tax obligations shall be commended according to the regulations of the Government.

Chapter V

IMPLEMENTATION PROVISIONS

Article 20.- Cases eligible to be considered for value added tax reduction defined in Article 28 of the Law on Value Added Tax are specified as follows:

1. For production, construction or transport establishments which, during the first years of application of the Law on Value Added Tax, suffer from losses due to the fact that the payable value added tax amounts are larger than the tax amounts they previously paid according to the turnover tax rate, they shall be considered for reduction of payable value added tax amount.

2. The value added tax amount to be reduced for each establishment shall correspond to the amount of loss it has suffered due to the above-said reason, but shall not exceed 50% of the payable tax amount for its production, construction and/or transport activities in the tax reduction year.

In cases where the production, construction or transport establishments, which are eligible to be considered for value added tax reduction, conduct activities in other business fields, the value added tax reduction shall be considered only for production, construction and transport activities.

3. The duration of value added tax reduction stipulated in this Article shall be considered annually and calculated according to the solar calendar year which shall be carried out within the first 3 years from 1999, the effective year of the Law on Value Added Tax.

The tax reduction shall be considered on the basis of business result and tax final settlement of each business establishment; for establishments that have not made tax final settlement but already made an annual loss estimate, the tax authority shall, in order to ease the financial difficulties for such establishments, consider and give temporary tax reduction. The temporary tax reduction shall be based on the annual loss estimates and the actual business situation of the establishments in the previous year, but not exceed 70% of the estimated amount to be reduced according to law.

The Ministry of Finance shall guide the procedures and stipulate the competence to consider the value added tax reduction as defined in this Article.

Article 21.- This Decree takes effect from January 1st, 1999; the decrees of the Government and other documents stipulating and guiding the turnover tax shall be annulled from the effective date of this Decree.

The resolution of all remaining tax matters, tax final settlement, tax exemption and reduction and the handling of turnover tax-related violations before January 1st, 1999 shall still comply with the respective provisions of the Law on Turnover Tax, the Law on the Amendments and Supplements to a Number of Articles of the Law on Turnover Tax and regulations on turnover tax in other legal documents.

The cases previously entitled to turnover tax exemption or reduction under the international agreements which Vietnam has signed or acceded to, or under the Government's commitments, are now entitled to the corresponding value added tax exemption or reduction under such international agreements or commitments.

Article 22.- The collection of the value added tax shall be stipulated as follows:

1. The General Department of Taxation shall have to organize the collection and reimbursement of value added tax for goods and services of domestic production and business establishments.

2. The General Department of Customs shall have to organize the collection of value added tax for import goods.

3. The General Department of Taxation and the General Department of Customs shall have to coordinate with each other in managing the collection of value added tax throughout the country.

The Ministry of Finance shall specify the organization of the value added tax collection stipulated in this Article.

Article 23.- The value added tax amount to be reimbursed to tax payers shall be deducted from the collected value added tax amount.

The Ministry of Finance shall specify the organization of the value added tax reimbursement stipulated in this Article.

Article 24.- The Minister of Finance shall guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government, the presidents of the People's Committees of the provinces and cities directly under the Central Government shall have to implement this Decree.

On behalf of the Government

For the Prime Minister

Deputy Prime Minister

NGUYEN TAN DUNG